- In December 2017, a tender notice from Directorate of income tax went out for publication of a book titled “Introduction to Cryptocurrencies and Forensic examination of a Bitcoin transaction.”
- 250 Copies of the 97 page book were ordered for distribution in the department.
- RTI response reveals the book was meant for ‘departmental use’ and is not for ‘ordinary citizens’
We read everyday how the tax departments and governments of other countries are publishing reports and investigating to effectively regulate and tax cryptocurrency transactions. Crypto regulations in India are presumably ‘coming soon’ as well.
However, we do not hear much from country’s centre for direct taxes on cryptocurrencies and tax on them. In fact, India has no set guidelines for tax on cryptocurrency transactions and many tax payers are treating it as capital gain or Business Income. Of course, it doesn’t mean the tax evaders are spared, as earlier this year the IT department sent notices to over one lakh crypto traders.
The centre of Direct taxes or the Department of Income Tax has been working secretly on educating the officials on cryptocurrencies and investigation of transactions. As it appears, back in 2017 the Directorate of Income Tax published an investigative book titled “Introduction to Cryptocurrencies and Forensic examination of a Bitcoin transaction (Guide for Investigation Directorate)”.
A tender notice for publishing 250 copies for the book went out on the department’s website on December 13, 2017. Coin Crunch India filed an RTI application under the RTI act to ask if we can have a copy of the book. Unfortunately, the reply was negative.
We received the response in Hindi, but the translation is as follows:
“You are informed that the said book was distributed in the Directorate of Income-tax Investigation, Central Board of Direct Taxes. This book was published for departmental use. Therefore, it can not be made available to ordinary citizens.”Directorate of Income Tax
Here’s the original response to the RTI we received by post.
It appears from the title, this book is meant to provide insight on how to also trace or examine Bitcoin transactions which are pseudonymous in nature. Cryptocurrencies such as Bitcoin or Ethereum are on a public blockchain, which allows anyone in the world to see the transactions and balances on any addresses. However, these public addresses cannot point you to who the owner of the address is directly, making them anonymous. Yet, not entirely.
Authorities around the world use complex algorithms and tools to successfully track down the owner of an address, sometimes the exchanges also comply in giving out information on users if the wallet address belongs to them. Private cryptocurrencies on the other hand such as Monero, ZCash, etc hide the balance and amount in transactions on their blockchains to protect the user.
India’s IT department surveyed the Cryptocurrency exchanges last year and within a few weeks, used the data from the exchanges to send notices to high value traders. Over one lakh notices were sent as per reports.
It remains to see whether the regulations on cryptocurrencies will recommend on how crypto should be taxed or as per recent reports, will ban it entirely. The highest court in India, supreme court, is hearing the petitions against RBI’s directive to ban the banks from supporting cryptocurrency trade as well as a demand from petitioners to effectively regulate cryptocurrency.
Overall, it seems like Cryptocurrency trade in India may take an interesting turn at the start of the new year.
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